1

Delivering on our strategy 27 May 2016

Today’s agenda

2

09:00

Delivering on our strategy

Hans van der Noordaa

09:30

Capital management on track

Clifford Abrahams

10:00

Greater control under Solvency II

Annemarie Mijer

10:30

Q&A

11:00

Break

11:30

Life: Building a capital light franchise

Leon van Riet

12:00

AM: Investing under Solvency II

Jacco Maters

12:20

GI: Strong platform, improving performance

Ingrid de Graaf

12:40

Q&A

13:00

Wrap Up

Hans van der Noordaa

Delivering on our strategy Hans van der Noordaa (CEO)

Track record of commercial and operational strength

4

• Diversified composite insurer across Life, General Insurance and Asset Management

Strong franchise

• Strong multi-channel, multi-label distribution platform with 4.2 million customers

• Strong network of IFAs and track record of pension expertise Commercial strength

• Leading position in chosen segments (e.g., market leader in new Group DC sales1) • Leader in customer centricity and #1 IFA satisfaction2 • Consistent track record in cost management, 37% operational expense reduction over past 6 years

Operational strength

• Leveraging technology to further improve distribution and efficiency • Strong combined ratio at 96.2%3 in 2015

1. 2. 3.

In each quarter from June 2013 through 31 March 2015, source: CVS In 2015, source: IG&H Management Consultants Excluding terminated and run off activities and market interest movements

2015: a year of transition Progress on strategic priorities

Active stakeholder engagement

Transition into Solvency II

• • • •

Disposal of non-core assets completed

• • • •

Ongoing focus on customer centricity and IFA satisfaction

• • • •

Standard Formula target range set at 140-180%

Commercial focus on profitable capital light new business

Ongoing cost discipline Revised strategy (‘Closer to the Customer’)

Preserve and unlock shareholder value with capital action plan Relationship with DNB restored Rating challenges addressed post rights issue

Rights issue completed, solid progress on management actions Addressed material Solvency II uncertainties with DNB Upgrading risk and capital management infrastructure – PIM by 2018

5

New management team

6

CFO

CRO

CEO

Executive Board Member

Executive Board Member

Clifford Abrahams

Annemarie Mijer

Hans van der Noordaa

Ingrid de Graaf

Leon van Riet

Life Netherlands

Life Belgium

ABN AMRO Insurance

General insurance

Bank

Asset management

Gerard van Rooijen

Filip Depaz

Hanneke Jukema

Harry van der Zwan

Marcel Zuidam

Jacco Maters

Opportunities in evolving mature home markets Market challenges

Opportunities for Delta Lloyd

• Low growth outlook • Sustained low interest rate environment

7

Netherlands

• Evolving customer preferences (e.g. shift DB to DC, digitalisation)



#1 player in DC pensions



Launch of APF in c.€60bn market (phase 1)



Decisive action in GI



Leverage technology and brands



Cost discipline



Focus on profitable businesses Group Life and Protection



Leverage strong multi-channel distribution infrastructure

• Low margins on traditional insurance products

• Increasing competitive pressures

• Regulatory changes and ongoing scrutiny

Belgium

We are ready to capture opportunities in our mature home markets and address challenges

Strong IFA satisfaction creates preference with advisors

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IFA satisfaction FY 20151 Consumer

Commercial

• Improved advisor satisfaction; #1 in pensions and authorised agents

7.6 #1

7.2 #3

7.1 #5

7.4

7.1

#1

#3

7.3

7.2

#3

#3

#7

• Leveraging strong best practice in pensions

• Excellent performance with advisors creates preference

• Strong customer satisfaction at

Pension Property and Casualty Commercial

Income

Authorised Agents

Life

Property and Casualty Individual

Savings

Mortgage

Customer satisfaction FY 20152

all brands

7.5

• Well-positioned for Closer to the Customer strategy

OHRA

1. 2.

6.6

Score & Ranking in IG&H Competitive Performance Benchmark. Source: Gfk

7.1

7.2

Delta Lloyd

ABN AMRO Insurance

Strong footprint with 4.2 million customers and smart multi-brand distribution model

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4.2 million Customers1

1.

Insurance Retail

>1.9m customers

Insurance Commercial

> 130,000 companies

Bank Retail

> 204,000 customers

Distribution

IFA (~100%)

Doubling: customers can be in more categories

>1m customers

> 948,000 customers > 44,000 companies

> 147,000 customers

Direct / IFA 70,000 participants

Online (65%) Contact centre (25%) Other (10%)

ABN AMRO: Online, Contact center and Bankshops

Strategy ‘Closer to the Customer’ We create value for our customers by offering convenient and sustainable solutions that help them manage uncertainty

Our mission

How we will reach success

Enablers needed to succeed

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Excel with our business partners in Multi-channel distribution

Excel in Fulfilling customer needs

VALUES & WAY OF WORKING

HUMAN CAPITAL

ALLIANCES & PARTNERSHIPS

ANALYTICS & INNOVATION

Leveraging Technology

RISK & CAPITAL MANAGEMENT

Most preferred insurer by 2020 (NPS, intermediaries) Deliver on capital generation and dividend targets

ASSET MANAGEMENT

The building blocks of our strategy Excel in Fulfilling customer needs

• • • •

Develop better understanding of our customers and their needs Proactively approach customers Provide insight with aggregated overview of customers' financial context Offer relevant solutions from integral perspective

Excel with our business partners in Multi-channel distribution

• • • •

Client determines how they interact Access to products, services and advice from our partners or from us directly At any time and any device Seamless multi-channel interaction with customers and business partners

Leveraging Technology

• • •

Focus on front-office technology and continuous process improvements Create consistent and easy end-to-end digital customer journeys Open our infrastructure for partners in the distribution value chain

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Connecting our customers and advisors Client and business partner expectation • Able to transact 24/7 with continuous Client

• •

interactions through all digital channels Insights in product status and financial position, consistent advice and optimal service “The insurer in your pocket”

• Interact directly through digital modules Business Partner

• •

connected to value chains Investing in client relations intelligence Integral module in third party customer platforms

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My Delta Lloyd • Single platform for all product lines (Life, GI, & Bank) • Single platform for our target groups: Commercial, Consumer and IFA

• Roll-out started; >95% of Advisors connected, customer roll out started in Q1

• Positive Consumer response (8+)

Near term management priorities • Financial and capital targets Capital

• Partial Internal Model (PIM) • Improve commercial and operational performance • Technological innovation

Performance

• Employee development & talent • Client and IFA

Client

• Focus on APF

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Strengthening solvency and capital generation

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Capital

• Execute capital plan • Commitment to net capital generation of €200-250m per annum Financial and capital targets

• €130m dividend for 2016

• Deliver on cost reduction target • Reduce leverage

• Committed to implementing by 2018 Partial Internal Model

• Better reflection of risk profile • Enhanced risk management capabilities

Improve commercial and operational performance

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Performance

• 10% operational expense reduction by 2018 Improve performance

• Run-off of Defined Benefit back book • Combined ratio optimisation program • Value over volume

• Increase pace of digital transformation Technological innovation

• Straight through processing • Develop customer intelligence and big data capabilities

Employee development & talent

• Focus on agility and change capabilities • Focus on know-how and analytical skills

Closer to the customer

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Client

• Leveraging strong customer footprint Customer and IFA

• Ongoing focus on customer and IFA satisfaction

• Leveraging technology to service IFAs and customers • Most preferred insurer by 2020 (NPS, intermediaries)

• New pension opportunity in Netherlands from 01/01/16 • Potential AUM in phase 1 up to € 60bn Focus on APF

• License expected in Q2 2016 • Strong interest from prospects • Potential for major transformation of Dutch pension market

Delivering our strategy Track record of commercial and operational strength

New and committed management team

Strengthening capital and capital generation

Strategy and management priorities in place to deliver

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Capital management on track Clifford Abrahams (CFO)

Clear capital management framework

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Objectives

Current status

• Operate within target range of

Solvency ratio

• SF ratio of 127% at Q1 2016 154%, in target range

• Target run rate of €200-250m net

Capital generation

capital generation per annum

• Reflects back-book and includes large UFR drag

• Holding company cash position

Cash

•

• Post rights issue pro-forma SF ratio of

• •

strengthened post rights issue Leverage remains relatively high S&P rating OpCo A- negative outlook

ALM Actions Cost & Perform. Focus

•

140-180% Improve capital quality and reduce volatility Implement PIM by 2018

• Sustainable underlying net capital generation

• Improve through operational initiatives and further ALM actions

• Reduce leverage, retain liquidity buffer • Improve remittances from businesses

• Maintain Single A S&P rating

On track to reach upper half of target range this year

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Illustrative 2016 Solvency II ratio developments 180%

c.8%

• Flattened Solvency II curve • Increased mortgage spreads • Temporary tiering effect

140%

154% c.27%

131%

FY 2015

c.2%

Net capital generation

c.(2)%

Run off equity transitional

127% c.(10)%

c.6%

Market Realised Q1 2016 impacts management actions

Ongoing risks and opportunities  Adverse market movements as in Q1    1.

5-10%

Progressing management actions Van Lanschot sale progress ongoing Implementation of Partial Internal Model

Estimate based on sale of full stake at current trading price

Rights issue Pro-forma Illustrative Remaining Sale of Van post rights impact of ALM Lanschot 1 issue market actions volatility

?

EIOPA proposing phased UFR reduction

? ?

Ongoing Solvency II insights Ongoing volatility and stress shocks

Progress on management actions Action

Expected impact

Q1 2016 Impact

OF/SCR1

3-5%



SCR

• Around half completed • Decreases expected return

1-2.5%



SCR

• Progress in line with sale of equities

3-5%



SCR

• Around half completed • Decreases expected return

2-4%



OF/SCR

Equity de-risking Currency de-risking ALM Actions

Credit de-risking Model enhancements Treasury restructuring

1-2%

Longevity hedge Total Sale VL

1. 2.

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SCR

-/+ c.10-15%

Sale of Van Lanschot

OF = Own Funds, and SCR = Solvency Capital Requirement Subject to market conditions

c.8%2

OF/SCR c. 6% OF

Comments

• Modeling enhancements for DL Life Belgium • Restructuring of centralised cash pool to reduce capital requirements

• Duration extension and restructuring • Dependent on pricing / regulator • Looking to refill the pipeline of actions • Marketed equity offering in progress

Capital quality improved post rights issue • Eligible capital reduced €0.1bn in Q1 2016

Eligible own funds (Standard Formula, €bn) 0.8 (0.1)

• Non eligible capital increased from €0.1bn to €0.3bn, due to tiering constraints

• Rights issue improves eligible capital by €0.8bn,

3.9 4%

that is 125% of €649m

• Tier 1 unrestricted capital contribution improved to 56%, but ambition to increase further

1.

Note: Total may not be equal due to rounding

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33%

4.6 3.8 0% 37%

13%

12%

51%

50%

Eligible own funds FY 2015

Eligible own funds Q1 2016

Non eligible capital Tier 3 Tier 2

4% 27% 14%

56%

Tier 1 restricted Tier 1 unrestricted

Eligible own funds pro forma post capital raise of €649m

Looking to operate within upper half of target range • On track for upper half of target range this year • We are looking to operate within the upper half of our target range reflecting

‒ commitment to dividends ‒ ability to absorb reasonable market volatility • Surplus capital generation (beyond cash dividend) is modest in the short-term

Delta Lloyd Solvency II ladder of intervention UFR phasing proposal EIOPA ALM actions and sale VL

Opportunity

• Long-term ambition to reduce hybrid and increase headroom for eligible capital

Opportunity for additional 180% capital return

Target

Pro forma post capital raise: 154%

Capital managed in line with risk appetite and capital plan 140%

• Reassess framework and dividend policy following EIOPA approval on UFR and clarity around PIM

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Actions to improve SII ratio, dividend reviewed

Action Q1 2016: 127%

125%

Remediation plan, dividend suspended

Escalation 105% Intervention

Regulatory plan in place

Net capital generation target of €200-250m

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Target run-rate of Solvency II net capital generation (€m)1,2

• Back-book drives capital generation

Excess spread over VA

c.160

Unwind UFR

c.(80)

Life new business (net of strain)

c.0

Unwind of risk margin

c.30

Unwind of SCR

c.80

Technical results (excl. Life)

c.20

Target range

200-250

• Headwinds from de-risking

• Lower interest rates will exacerbate UFR drag • Opportunities from operational improvements and further investment optimisation

• Management committed to target range

1. 2.

Illustrative contributions of how Delta Lloyd could achieve target Before costs and benefits of ALM actions and benefit of use of proceeds, before market volatility and non-operational variances, net of tax and minority interest

Businesses focused on driving net capital generation

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Legend:

Target run-rate of Solvency II capital generation

Risk Opportunity

(€m)1,2

Life

General Insurance

Asset Management

Corp. & Other activities

Excess spread over VA

c.180

c.10

-

c.(30)

Unwind UFR

c.(80)

-

-

-

Life new business (net of strain)

c.0

-

-

-

Unwind of risk margin

c.30

c.0

-

-

Unwind of SCR

c.85

c.(5)

-

-

Technical results (excl. Life)

-

c.40

c.20

c.(40)

210-230

45-55

20-25

(75)-(60)

Target range 1. 2.

Illustrative contributions of how Delta Lloyd could achieve target Before costs and benefits of ALM actions and benefit of use of proceeds, before market volatility and non-operational variances, net of tax and minority interest

Managing the portfolio to drive net capital generation Illustration of Solvency II capital generation by business unit (€m)1 DL Asset Management Net capital generation on required capital (%)

30%

1.

Legend:

Optimise

Decisive action Grow selectively

ABN AMRO GI 20% 15% 10%

ABN AMRO Life DL Insurance GI

DL Life Netherlands

DL Group Total

DL Belgium Life 5% 0%

DL Bank Netherlands 0 1 2 Size of bubble indicates contribution to net capital generation

3 Required capital (€bn)

Illustrative contributions of how Delta Lloyd could achieve target by business unit. Before costs and benefits of ALM actions and benefit of use of proceeds, before market volatility and non-operational variances, net of tax and minority interest, ABN Amro Insurance includes minority interest (Delta Lloyd owns 51%). Net capital generation on required capital for DL Asset Management and Bank Netherlands shown as a share of Shareholders’ Funds

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Targeted cost initiatives underpinning net capital generation • Aim to reduce operational expenses for 2016 below

Operational expenses1 (€m) +2%

€610m ‒ target reflects balanced approach between cost savings and reinvestments in amongst others digital

• 2018 target for operational expenses is less than €560m

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(10)%

619

610

560

605

• Reduction of costs will continue along four themes ‒ IT legacy reduction ‒ straight through processing ‒ digitalisation ‒ online servicing • Update since FY15 ‒ Q1 expenses on track ‒ detailed planning progressing

1.

Restated for sale of DL Bank Belgium and DL Germany

FY 2014 FY 2015 FY 2016 Extraordinary Pension benefitpension benefit

FY 2018

Quality of Holding company cash reset after rights issue • Former DL Bank Belgium subordinated loan repaid to Delta

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Holding company cash position development1 (€m)

Lloyd in May 2016

• Following the sale of Van Lanschot, Holding company to

c.630

c.60

c.450

c.75

1.5x c.€400m

achieve target cash buffer of 1.5x Holding company annual outflows

1.0x c.€270m

• Revolving Credit Facility initiated at Holding to support LAC DT and strengthen flexibility

• Aiming for Holding company operating cash flows to be net positive going forward

• Opportunity to delever though (partial) refinancing of senior loan due in 2017

(319) FY 2015

Rights Issue Former DL Bank Belgium

Estimated Van Lanschot proceeds²

Pro-forma

Target Holding company cash buffer of 1.5x Holding company outflows 1. 2.

Before business unit remittances and Holding company expenses Cash contribution from the sale of Van Lanschot stake at Holding company estimated at current share price

Aligning metrics and disclosures with Solvency II regime • Solvency II approach to VNB and NAPI ‒ application of Solvency II contract boundaries ‒ inclusion of renewals of existing contracts, whereas extensions are recognised as existing business

• Reviewing approach to valuation of liabilities under IFRS from Collateralised AAA to Solvency II curve ‒ Solvency II curve is a better reflection of current market interest rates ‒ improve resilience of IFRS Shareholders’ Funds, as we hedge to maintain Solvency II ratio

• Disclose net capital generation and components • Reviewing approach to IFRS operational result to align IFRS investment spread with excess return approach under Solvency II net capital generation

• Looking to refresh key Financial and Performance Indicators to align with priorities and business model

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Capital management on track Clear capital management framework and action plan

On track to reach upper half of target capital range this year

Businesses focused on driving capital generation

Quality of Holding company cash reset after rights issue, opportunity to de-lever further

Aligning metrics and disclosures with Solvency II regime

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Greater control under Solvency II Annemarie Mijer (CRO)

Integrated framework critical for risk management Are all relevant stakeholders effectively informed?

Monitoring Objective Setting

Information & Communication

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What events may jeopardize our objectives?

Control Environment • Governance • Culture • Behaviour

Control Activities

How should we deal with them?

Risk Response

Risk Assessment

Event Identification

What is the impact of such events?

Everyone responsible for risk in own domain Group level

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Business unit level CEO

BM Group Compliance

CRO Group Actuarial

CFO

CRO

BM Group Risk

Model Validation Unit

Full CRO functional network organisation in Group All SII key functions appointed

Compliance

Actuarial

Risk

Strengthening Business Unit responsibility

Core values Reliable

Honest

Teamwork

Risk control under Solvency II progressing well Pillar 1: Models

Pillar 2: Behaviour

Pillar 3: Transparency

Measurement

Management

Reporting

• New and accountable

• Standard Formula

• Standard Formula Challenges of the Past

(incl. external review)

• Loss-Absorbing Capacity Deferred Taxes

Ongoing Developments

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team in place

• CRO function

• Open and clear

framework

• Longevity derivatives

• Capital generation

• Ultimate Forward Rate

• Internal control system

• Partial Internal Model

vs. IFRS

• Industrialisation reporting processes

• Market standard sensitivity reporting

Focus on four key recent developments

1.

35

Remit

Timing

Size

LAC DT

National interpretation

Finalised and approved

€488m (Q1 2016)

Longevity

Company specific

During 2016

Upside & downside

UFR

Europe wide

1 January 2017

4.2% → 3.7% (∆21pp)

PIM

Company specific

1 January 2018

10 – 15%1

Based on Oliver Wyman analysis of comparable peer group and not necessarily indicative of uplift for Delta Lloyd. Subject to regulatory approval

LAC DT finalised and approved

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• Recoverability analysis at business unit level, subject to strict framework

• Recoverability analysis before and after shock assuming financial situation after stress ‒ implementation of forward looking recovery plan and adjustment future taxable profit LAC DT (€m)1

LAC DT % of SCR Q1 2016 (36)

Status

524

25%

488

24%

25%

15%

0%

Q4 2015

Interaction with DNB Ongoing developments 1.

Q1 2016

DLL

DLS

• Discussions with DNB focused on assumptions and recovery scenarios • Discussions ongoing with NBB for LAC DT recognition Delta Lloyd Belgium

Group LAC DT is calculated by multiplying the sum of the solo LAC DTs with the group contribution factor (adjusted for diversification)

AAL

AAS

DLLB

Comprehensive and realistic recoverability model

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Our assumption

Rationale

Assessment

Run-off scenario pre- and post stress

More uncertain future profits less weighted

Accurate

No life new business profit pre- and post stress

DTA and LAC DT only in-force

Consistent

No UFR effect in returns

UFR drag reduces return

Realistic

Return reflects cost of capital subordinated loans

Realistic cost in return

Realistic

No excess return on risk margin of UL portfolio

Realistic return

Non opportunistic

Fiscal entity only used in recoverability

Fiscal entity still exists post stress

Realistic

No bounce back applied post stress

Mean reversion of securities pricing not included

Conservative

No future tax planning pre- and post stress

No future management action on tax planning

Realistic

Exploring longevity hedging options • Longevity risk from unexpected increases in life expectancy Status

• Increasingly materialised risk, requiring higher capital buffers

• Longevity hedges in 2014/15 transferred substantial longevity trend risk, improving SII ratio • DNB on site review of hedges and revised treatment end 2015 Interaction with DNB

• Roll forward mechanism excluded ((14)% points SII SF) as at Q4 2015 • Restructuring required to ensure reinsurance treatment • Exploring extension of hedges and conversion to indemnity reinsurance

Ongoing developments

• Cost – benefit analysis • Hedging strategy also to be optimised for future PIM implementation

38

Reduced regulatory uncertainty on UFR Status

39

• EIOPA launched public consultation: ‒ reducing UFR from 4.2% to 3.7% phased in or immediately ‒ UFR composed of expected real rate and inflation rate • Decision expected in September and no new solution implemented before 2017 UFR Impact

• Decrease in UFR to hit Solvency II one off, although reduced Impact

under EIOPA proposal

• Capital generation to increase conversely by €17m

Risks

UFR

SII Ratio

Capital generation

3.7%

(21)pp

+ € 17m

4.0%

(9)pp

+ € 7m

• Despite hedge policy, twist risk remains important ‒ due to UFR, interest rate movements post 20 years do not impact liabilities ‒ incremental increase swap rates post 20 years vs. swap rates before 20 years will result in loss

PIM implementation is a top priority Timeline for IMAP (Internal Model Application Pack) • Upgrading PIM and re-launching internal model application pack (IMAP)

Feb ’16

Jul ’17

Jan ’18

1.

Submission of improvement plan to College of Supervisors

Submission of revised internal model application package to College of Supervisors Partial Internal Model fully implemented and approved

Note: The points above are subject to discussions with our supervisory authorities

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Key objectives • Better risk management ‒ align SF SCR with specific risk appetite and profile ‒ better management information ‒ more streamlined risk management infrastructure and process

• Align to market practice and regulatory expectations

Delivery of enhanced PIM over next two years

41

Comprehensive review and clear prioritisation

Senior management priority and ongoing alignment with regulator

• Market review and prior experience ‒ addressing regulatory

• Remaining closely engaged throughout

‒

feedback in line with leading market practice

1

2

program

• Dialogue with College of Supervisors to align expectations and remedy blockages

3 Industry leading software solutions and external expertise • Ensure delivery and outside perspective on best practice, external consultants hired with international experience in PIM implementations

• Proprietary models underlying PIM replaced with industry-leading software

Greater control under Solvency II Integrated risk management framework

CRO function network and SII key functions in place

LAC DT finalised and approved

PIM implementation is a top priority

42

Life: Building a capital light franchise Léon van Riet

Strategy delivers capital generation

44

Target run-rate of Solvency II capital generation (€m)1,2 Excess spread over VA

Unwind UFR Life new business (net of strain) Unwind of risk margin

• Effective management of own risk investments, optimise risk

c.180

adjusted returns

• Decrease in interest rates will have negative impact on unwind of

c.(80)

UFR

• Commercial actions to improve life new business (net of strain)

c.0

• Focus on profitable growth in DC/PPI/APF

• Focus on effective run-off DB

Unwind of SCR

c.30 c.85

Focus of this presentation Target run-rate 1. 2.

Segment Life comprises Netherlands Life, Belgium Life and ABN AMRO Insurance Life Illustrative contributions of how Delta Lloyd could achieve target. Before costs and benefits of ALM actions, benefit of use of proceeds, market volatility and non-operational variances, and net of tax and minority interest

c.210 – 230

Major transformation in Dutch pension market Market shifting from DB to DC driven by:

45

Dutch pension market AUM and GWP FY 2014 (€bn)

• Low interest rates and Solvency II pricing • Review of Dutch pension system by government

c.€1,200bn

€36bn

c.800

24

Pension funds

• Accelerated consolidation in pension funds driven by ‒ low coverage ratios ‒ stricter regulation

• Shift from DB (nFTK) to PPI/DC is gaining momentum

PPI APF

c.250 Insurers

c.150

• Access to pension fund market through APF and PPI/DC Insurers

Source: DNB, CVS, 2014

AuM Company pension funds

DC

APF

7 5

GWP Industry-wide pension funds

Strong market position with capital light new business focus Majority of pension market shifted to DC

Leading position key market segments1

• Market leader in new DC pension plans

• Transforming DB pensions into closed book

46

DC

• Gaining position in term insurance

37%

1.6%

Market Share NB Premium 2015

Margin DC Q1 2016

• Capitalising market leading position in PPI PPI

Term Insurance

Source: CVS, Pensioen Pro Magazine No.9 (2016) and internal data, DNB, Delta Lloyd analysis 1. Based on the Netherlands only

20%

c.170%

Market Share AUM 2015

CAGR AUM PPI market 2012-2015

17%

Market Share NB Premium 2015

2.0%

Margin term Q1 2016

Accelerating shift from DB to DC: rapid growth in assets

47

DB to DC shift

Growth in assets

• >65% of existing DB contracts renewed to DC1

• Delta Lloyd targeting > €15bn of unit linked AUM by 2020,

• Delta Lloyd shifts faster than market • New legislation allows for capital light post-retirement annuities as of Q3 2016

• Further shift towards DC expected going forward

• Profitable technical result in DC ‒ VNB 1.6% margin DC Q1 2016

Dutch NB Premium market and Delta Lloyd (excl. PPI) Market

DC

DB

66%

34% 2014

Unit linked AUM DLG and segregated fund mandates (€bn)

Delta Lloyd

>152 10

72%

+6pp

85%

93%

+8pp

28%

(6)%pp

15%

7%

(8)pp

2014

2015

2015

Source: CVS and internal data 1. Corporate market 2. Excl. Market returns and APF

driven by: additional current annual premium DC/PPI newly acquired DC/PPI customers shift of DB contracts to DC/PPI at renewal APF opportunity allows for additional growth

‒ ‒ ‒ ‒

DC

2016

2020 (e)

#1 pension insurance company in Netherlands • Most preferred pension provider over last 4

years1

48

Customer satisfaction group life Netherlands and BeFrank1

• Pricing position usually #4 or 5 in market: pole position not detrimental to profit margins

• Continuous innovation combined with agility on solid IT platform

• In 2016 launch of this year’s update providing an even better alternative to DB:

‒ post-retirement annuities (new legislation) ‒ lifecycle optimised plus ESG-proof asset mix ‒ customer documentation 100% online 2008

2009

2010

2011

Delta Lloyd

1.

Source: IG&H Research

2012

2013

Market

2014

2015

Fast growing position in term insurance market • Strong market shares in term insurance ‒ The Netherlands: 17% ‒ Belgium: 9% (based on GWP)

49

Term insurance NB premium market share in Netherlands

• Gaining market share due to innovative proposition ‒ completely online and STP ‒ pricing top 4-5 • Natural hedge for longevity risk

20% 17% 13% 11%

10%

• Capital light product • Proposition in Belgium well supported by acquisition of ZA in 2013

• Positive VNB of Netherlands and Belgium in Q1 2016 accretive to capital generation

Source: CVS, internal data and Assuralia

2011

2012

2013

2014

2015

Digitalisation decisive for pension providers • Online portal driving improved customer satisfaction and reduces costs

• ‘My Delta Lloyd’ launched in 2015 ‒ pension portal fully integrated ‒ >450k customers online ‒ >95% of brokers connected • New pension 1-2-3 legislation will accelerate online use of DL portal from 1 July 2016 onwards ‒ detailed and customer friendly pension information online ‒ pension planning tools

• Dutch regulator rated DL Pension Portal as one of the best in Dutch market

• DC and BeFrank have the best portals in the market: solid foundation for DL APF

50

Entering pension fund market with launch of Delta Lloyd APF

51

Growth potential for APF (AUM) • New pension legislation in Netherlands from 01/01/16 ‒ general pension fund for consolidation of pension funds • Large pool of assets ‒ phase 1: shift of up to €60bn AUM to APF ‒ phase 2: consolidation of small/mid-sized industry

Current insurance market: c.€150bn

c.150

pension funds to APF expected

c.250

Additional earnings potential

‒ fee of 40-50 bps ‒ incremental margin from additional AUM ‒ risk premium in group life term insurance

Phase 2: >2017

c.800

• DL licence expected in Q2 2016 • Strong interest: pipeline of several billion AUM Insurance market (incl. DC, DB and PPI) Company pension funds Source: DNB and internal data (2014)

Industry pension funds

Phase 1: 2016 onwards

DB back book run-off delivers sustained capital release

52

Delta Lloyd Life – Technical provisions back book2 • Characteristics of current DB portfolio: ‒ > 5k contracts and >500k customers ‒ contract renewals every 5 years ‒ 50% of technical provisions which will have run-off by 2036

• No new business for DB due to low interest rates • DB renewals at profitable SII pricing (RAROC >11%) • Further decrease of DB renewals expected • Longevity and interest hedges enable predictable capital release in back book

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 2058 2060

• >65% DB contracts renewed to DC/PPI1

In force excl. NB and renewals In force incl. NB and 35% renewals 100% renewals

Resulting in unwind of risk margin of c. €30m and unwind of the SCR of c. €85m p.a. 1. 2.

Corporate market Includes extensions and new business

Cost reduction of back book delivers capital generation • Achieved 5% yearly cost reduction since 2013, while

53

Operational expenses (€m)

portfolio grew 9% ‒ cost per unit c.14% lower year-on-year over last 4 years

• Drivers for cost reduction: ‒ online, STP and digitalisation ‒ process optimisation ‒ product rationalisation ‒ portfolio migration ‒ legacy reduction

137 CAGR: (5%)

129

123

• Substantial investments made online and in product

117

innovation

• Extensive experience with cost reduction in Individual Life (- 10% CAGR) will be leveraged to DB back-book 2013

2014

2015

2016 (e)

Strategy in place for continued improvements

54

Strategic priorities Individual Life closed book • Separation of individual life closed book organisation • 25% cost reduction achieved over last two years driven

Legacy reductions

by conversion strategy

2014:

8

Back office systems

4

2017: Back office systems

• Legacy decommissioning resulting in business and IT cost reduction

• Apply individual life closed book experience to DB closed book

Individual Life closed book

Key conversion achievements

1.

Source: DL Life Netherlands internal data, CVS, Pensioen Pro Magazine No.9 (2016) and internal data

2012:

€33m Costs

200,000 Policies converted

Building a capital light franchise Strong position in capital light products, independent of dynamics in pension system

Best-in-class customer service with leadership in customer centricity and #1 in IFA satisfaction

Continued implementation of operational excellence

Capital generation driven by back book and AUM growth from APF, DC and PPI

55

AM: Investing under Solvency II Jacco Maters (CIO)

Scalable platform

57

Own / Third party AUM (€bn)

Assets under Management

Other Real Estate

2%2%

Mortgages

19%

46.2

6.1

€70bn

17.7

57% Own Risk Traditional

€70bn

Third Party Risk Unit-linked

Assets under Management Data as per 31.12.2015

20% Equity

Fixed Income

Third party

140

Employees

40

Investment Specialists

Since 1960 Oldest Fund

Strategy, mission and vision Focus on Institutional Management 60

Investment Solutions

Organisational Improvements

58

• Logical link with current activities for insurance companies • Fund business is suffering from negative growth and margin compression as a result of move to passive management 55

55

60

• High growth profitable spot for active asset management • Unique selling proposition in comparison to pure-play asset managers

• Upgrade of application landscape

• Strengthening of risk- and compliance framework

Pro-active services provider offering added value to international institutional investors through sustainable, customised and risk controlled investment solutions

A cornerstone of Delta Lloyd

Captive 60

• Delivery of management actions to reduce Solvency II capital ‒ sale of capital intensive assets ‒ optimisation of portfolio and asset classes under SII ‒ delivery of capital light solutions 55

•55 Delivery of added value on60assets and matching of liabilities • Capital light business model • Profitable business with high performance fees (FY2015: €25.3m) from outstanding investment funds

Standalone Profitability

performance, even in challenging years

• Leverage knowledge and experience of investment management for insurance companies • More efficient, unique selling proposition in comparison to pure-play asset managers • Added value in new initiatives of other business lines such as shift to DC and start of APF

59

Focusing on optimal returns under Solvency II: RAROC

60

• Use of RAROC favours balanced risk-return view • Increase of assets that match liability profile and have relatively high Solvency II risk adjusted return ‒ fixed income ‒ mortgages ‒ residential real estate

RETURN 60

CAPITAL USAGE 55

55

• Focus on capital reduction while keeping good return

RAROC (Risk Adjusted Return on Capital) RETURN / CAPITAL

60

Solvency II capital charges conflict with economic view • Our analysis always starts with our economic view

Asset Class

Excess Return (bps)1

Outlook Next 12 Months

Capital Charge

Mortgages

104

Positive

Low

Dutch residential real estate

194

Positive

Moderate

Equities

344

Neutral

High

• Solvency II capital charge for risky assets would lead to a move from risky to less risky asset classes

‒ on a general level from (private) equity and commercial ‒

real60estate to fixed income and cash 55 55 within fixed income from corporates to sovereigns

• Focus on return leads to a different portfolio

1. 2.

Excess return (net of 1-year swap rate of (6) bps) Credits include corporate and collateralised bonds

61

Credits2

127

Low, depending Slightly negative on rating and maturity

(Sub) Sovereigns

15

Slightly negative

Very low

Capital optimisation actions RAROC1  to 

• Increase of assets that match liability profile and have relatively high Solvency II risk adjusted return • Private debt a good example • Within credits move to more capital light instruments



• Reduction of riskier assets with relatively low Solvency II risk adjusted return • Private equity portfolio sold • Transitional measures

Real Estate



• • • •

Mortgages



• Appetite for growing mortgage portfolio • Optimizing mortgages portfolio composition under Solvency II

Fixed Income

Equities

1.

Indicative for RAROC

High quality residential investments Mainly up market rented houses/apartments High occupancy rate of Dutch direct residential portfolio of 98% Commercial real estate portfolio sold

62

Continuous optimisation of asset allocation

63

Own risk assets • Delivering on earlier announced management actions HY 20141 Strategy2

• Continuing to optimise portfolio under Solvency II

• Asset allocation priorities include: ‒ increased appetite for private loans ‒ increased appetite for mortgages ‒ optimisation within asset classes

1. 2.

Restated for sale of Delta Lloyd Germany and Delta Lloyd Bank Belgium Strategy presented during previous investor day

FY 2015

Strategy

Cash and deposits

0%

=

1%

Equity

8%



5%

Real Estate

5%



3%

FI Securitised Assets

3%



1%

FI Corporates

16%



18%

FI Covered

5%



3%



Sub-Sovereign

12%



13%



Sovereigns

28%



29%

Loans

4%



4%



Mortgages

19%

=

23%





Third party solutions: leveraging our expertise

64

Case Study: Private Debt Investing

• Logical step to use internal insurance investment knowledge and expertise externally

• Leverage experience of servicing internal clients by using 55 in providing 60 60 tailorour investment management expertise 55 made solutions to external clients with the same needs: ‒ small to mid-sized insurers ‒ pension funds

• Focus on client’s risk/reward appetite

• One of the first movers in the European private debt market

• Corporate Debt: 5-7 years, 3-5% coupon, senior ‒ direct loans to northwest European mid-market ‒ ‒

companies partially government guaranteed (e.g. export credit) moderate leverage and strong covenants drive high recovery rates

• Low SII capital charge, high return • Proven track record in attractive asset class with demand from other small- and midsized insurer

Expanding on our successful third party business

65

Performance fee FY 2015 = €25.3m • Credits ‒ top ranked specialist fixed-income fund house Successful 60 franchise in innovative funds

• Private Debt 55 55 60 ‒ leveraging on years of experience • Participation Strategy ‒ innovative equity strategy ‒ strong performance with high

5%

4%2%

7%

40% 19%

performance fees

• TAA Funds and Sovereigns Solutions offered for institutional investors

23%

• Leveraging on knowledge and experience for insurance business

DL Europees Deelnemingen DL Institutioneel Blue Return DL European Fund

DL European Participation DL Select Dividend

DL Deelnemingen Cyrte Africa Fund

APF market offers high potential AUM growth

66

• Investment solution for Dutch pension investors

• ALM

• Smart framework with transparent pricing and open

• Strategic Allocation

architecture for the return portfolio

Board

• Investment beliefs

• Proven track record for matching portfolio

• Manager of Best Pension Fund of the Netherlands 2015

• High potential for AUM growth as the market for APF is substantial with high volumes and profitable margins

• Selection • Reporting • Benchmarking • Investment and Investment Funds

• Internal and external

Investing under Solvency II Optimising capital and return for insurance business of Delta Lloyd

Profitable capital light business line

Proactive solution provider with a proven track record

Credible asset manager for group companies and third party business

67

GI: Strong platform, improving performance Ingrid de Graaf

Strong capital generation with further upside • Technical results of GI business directly translates into Group capital generation

• GI business target run-rate capital generation of €45-55m c.20% of group target range

• SII diversification benefit supports capital efficiency • Investment portfolio optimisation lever for further upside • Future upside from performance improvement

69

Target run-rate of Solvency II capital generation (€m)1 Excess spread over VA

c.10

Unwind UFR

c.(0)

Life new business (net of strain)

n/a

Unwind of risk margin

c.0

Unwind of SCR

c.(5)

Technical results (General Insurance)

c.40

programme

c.20%

Target range

1.

Illustrative contributions of how Delta Lloyd could achieve target. Before costs and benefits from ALM actions, benefit from use of proceeds, market volatility and non-operational variances, and net of tax and minority interest

45-55

Group 200-250 Target Range

Well-diversified, multi-channel GI proposition

70

GWP by business line FY 2015 • Broad and well-diversified product mix serving retail and

Total GWP: €1,353m

corporate customers in the Netherlands

• True multi-channel distribution strategy via agents, brokers, direct, and exclusive access to ABN AMRO network

Other

12%

• Three strong and highly identifiable brands: Delta Lloyd, OHRA, and ABN AMRO Insurance

• Success in profitable niche segments such as offshore wind parks, commodities and installations and production facilities

30% Income Protection

Transport

16%

5% 8%

Liability

29% Motor

Fire

Strong IFA satisfaction creates preference with advisors

71

IFA satisfaction FY 20151 • Strong customer satisfaction at

7.4

all brands

7.2

• Well-positioned for Closer to the • Despite corporate turmoil high satisfaction

#1

7.1

#3

#5

Property and Casualty Commercial

Income

Customer strategy

7.3 #3

Authorised Agents

Property and Casualty Individual

Customer satisfaction FY 20152

1. 2.

7.6

7.5

7.6

OHRA General Insurance

Delta Lloyd General Insurance

ABN AMRO General Insurance

Score & Ranking in IG&H Competitive Performance Benchmark. Source: Gfk

Well-positioned in competitive market

72

Combined ratio Dutch peers FY 20151 • Stable market position maintained despite challenging

Group Combined Ratio FY 2015(%) 108%

102%

104%

95%

• Claims ratio well below average of peers

34%

31%

29%

24%

• Expense and commission ratio in line with scope for

74%

71%

76%

71%

Peer 1

Peer 2

Peer 3

Peer 4

competitive dynamics

Peer average Combined 31% ratio 102%2 66% 96%

improvement

• Highly profitable and cash generative: ‒ combined ratio outperforms 98% target ‒ technical result of c.€40m - directly contributes to net capital generation

Claims ratio

Expense and Commission ratio

Combined ratio by business line FY 20153

• Focus on products with attractive margins

• Ongoing cost reduction programs

Delta Lloyd

72%

78%

Income Protection

Other

96%

100%

103%

110%

Liability

Fire

Transport

Motor

96%

• Balance sheet / investment portfolio optimisation 1. 2. 3.

Ranked by GWP Average Combined Ratio excluding Delta Lloyd Excluding terminated and run-off activities and market interest movements

Group

Group target 98%

Discipline driving margin improvement Strict underwriting

73

Cost control

• Value over volume Leading principles

• Risk based / competitive pricing

• Automation and digitalisation

• Exit, re-price or run-off unprofitable segments

• Process improvements

• Improve client retention and customer lifetime

• Cash generation and capital optimisation

value

Examples

• Margin improvement P&C (motor in particular)

• IT legacy reduction • DL retail (LOI Voogd&Voogd)

Unlocking future value Grow profitable segments

Leading principles

Leveraging technology

• ‘Putting customer first’ implementation

• Straight through processing

• Multi-channel distribution

• Digitalisation

• Shaping product mix

• Online servicing

• OHRA and ABN AMRO Insurance Examples

74

• Income protection full service solution ‒ capitalise on top-positioning in pensions • Renewable energy (e.g. wind)

• SME market

• Sharing economy • Internet of things, domotica

Margin improvement in action • Focus on profitable client groups with low

Motor combined ratio by distribution channel1

outflow (high retention) and/or high client value clients

• Further risk differentiation, following the 2015 car insurance policy measures

• Upgrading pricing model for Delta Lloyd Retail, in cooperation with Towers Watson

DL commercial

50% Expense & Commission Ratio

• Competitive pricing on more profitable

75

DL individual

40% 30%

AAV individual Ohra

20%

Auth. agents

10% 0% 50%

60%

70%

80%

Claims Ratio Size of the bubble based on NEP (€m) 1.

Excluding terminated and run-off activities and market interest movements

90%

Big data and expertise driving down claims • Claims reduction: professional semiautomated scouting and matching stolen property on internet in cooperation with authorities; confiscation and recovery services

• Intelligence: proprietary big data collection to understand theft of insured goods and organise new level of prevention based on predictive intelligence

Accumulated reduction claims experience since start of >€6m

76

OHRA reaching digital maturity, leveraging potential for Delta Lloyd • Successfully migrated to online self-service for cost reductions and customer satisfaction ‒ My Ohra (58% of customers) ‒ virtual Assistant for “Automated Help” ‒ new channels receive high customer satisfaction (WhatsApp: 8.9)

• Currently online sales contributes c.65%

77

Strong platform, improving performance Leveraging strong position in chosen markets ABN AMRO, OHRA and Income

Improving COR, taking decisive action

Leveraging technology and continuing to improve customer lifetime value and IFA satisfaction

78

Wrap Up Hans van der Noordaa (CEO)

Delivering our strategy Strong and stable franchise

• Strong brands, 4.2m customers • Broad distribution, highly satisfied IFAs and customers • Mature but profitable markets • Capital reset, rating challenges and regulatory relationship addressed • New management team

80

Execute capital plan, improve performance

• Delivering management and ALM • • • • • • •

actions Upgrading risk infrastructure Implementing PIM by 2018 Managing back book for value Operating performance and business improvement Cost reduction Deleveraging Investment opportunities under SII

Growth closer to the customer

• • • • • •

Leveraging distribution and technology Value over volume DB to DC opportunity Growth in APF Improve GI portfolio Most preferred insurer by 2020

On track to deliver on promises Target range of €200-250m net capital generation

Targeted €130m dividend for 2016

Disclaimer

81

•

This presentation is being supplied to you solely for your information and used at the presentation held in May 2016. The information contained herein is for discussion purposes only and does not purport to contain all information that may be required to evaluate the Company (as defined below) and/or its financial position. This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase. It is an advertisement and not a prospectus for the purposes of the Prospectus Directive.

•

This presentation does not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in the United States or any other jurisdiction. The securities referred to herein have not been, and will not be, registered under the Securities Act of 1933, as amended, and may not be offered, exercised or sold in the United States absent registration or an applicable exemption from registration requirements. There is no intention to register any portion of the offering in the United States or to conduct a public offering of securities in the United States

•

This presentation should not be distributed, published or reproduced in whole or in part or disclosed by recipients and any such action may be restricted by law in certain jurisdictions. Persons receiving this presentation should inform themselves about and observe any such restrictions: failure to comply may violate securities laws of any such jurisdiction. In particular, this presentation is not to be released, published or distributed, directly or indirectly, in or into Canada, Australia or Japan or any other jurisdiction in which the distribution or release would be unlawful.The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein, in any jurisdiction in which such offer, solicitation or sale would be unlawful. Investors must neither accept any offer for, nor acquire, any securities to which this document refers, unless they do so on the basis of the information contained in the Prospectus

•

This communication is directed only at (i) persons who are outside the United Kingdom or (ii) in the United Kingdom, persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), or who are high net worth entities, and other persons to whom it may lawfully be communicated, including those falling within Article 49(2) of the Order (all such persons together being referred to as “relevant persons”). Any investment or investment activity to which this communication relates will only be available to and will only be engaged in with, relevant persons. Any person who is not a relevant person must not act or rely on this document or any of its contents

Disclaimer

82

•

Certain statements contained in this presentation that are not historical facts are “forward-looking statements.” Forward-looking statements are typically identified by the use of forward looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “intends”, “estimates”, “plans”, “assumes”, “anticipates”, “annualized”, “goal”, “target” or “aim” or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy that involve risk and uncertainties. The forward-looking statements in this presentation are based on management’s beliefs and projections and on information currently available to them. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Delta Lloyd’s (as defined below) control and all of which are based on management’s current beliefs and expectations about future events.Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. Delta Lloyd undertakes no duty to and will not update any of the forward-looking statements in light of new information or future events, except to the extent required by applicable law. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement as a result of risks and uncertainties facing Delta Lloyd and its subsidiaries. Such risks, uncertainties and other important factors include, among others: (i) changes in the financial markets and general economic conditions, (ii) changes in competition from local, national and international companies, new entrants in the market and self-insurance and changes to the competitive landscape in which Delta Lloyd operates, (iii) the adoption of new, or changes to existing, laws and regulations including Solvency II, (iv) catastrophes and terrorist-related events, (v) default by third parties owing money, securities or other assets on their financial obligations, (vi) equity market losses, (vii) long- and/or shortterm interest rate volatility, (viii) illiquidity of certain investment assets, (ix) flaws in underwriting assumptions, pricing and/or claims reserves, (x) the termination of or changes to relationships with principal intermediaries or partnerships, (xi) the unavailability and unaffordability of reinsurance, (xii) flaws in Delta Lloyd’s underwriting, operating controls or IT systems, or a failure to prevent fraud, (xiii) a downgrade (or potential downgrade) of Delta Lloyd’s credit ratings, and (xiv) the outcome of pending, threatened or future litigation or investigations, or other factors referred to in this presentation. Should one or more of these risks or uncertainties materialise, or should any underlying assumptions prove to be incorrect, Delta Lloyd’s actual financial conditions or results of operations could differ materially from those described herein as anticipated, believed, estimated or expected. No statement in this presentation is intended to be nor may be construed as a profit forecast.

•

Please refer to the Annual Report for the year ended December 31, 2015 for a description of certain important factors, risks and uncertainties that may affect Delta Lloyd’s businesses

•

This presentation contains figures over the first quarter of 2016 for Delta Lloyd NV (‘Delta Lloyd’ or the ‘Company’), inclusive of Delta Lloyd Levensverzekering, Delta Lloyd Schadeverzekering, ABN AMRO Verzekeringen, Delta Lloyd Life Belgium, Delta Lloyd Asset Management and Delta Lloyd Bank Netherlands.

•

No reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company or their subsidiary undertakings, affiliates, respective agents or advisers or any of such persons’ affiliates, directors, officers or employees or any other person as so to the fairness, accuracy, completeness or verification of the information or the opinions contained in this presentation and no liability is accepted for any such information or opinions. Persons receiving this document will make all trading and investment decisions in reliance on their own judgement and not in reliance on the information in this presentation.

•

The figures in this presentation have not been audited. They have been partly taken from the Annual Report for the year ended December 31, 2015 and the Interim Management Statement over the first quarter of 2016, and partly from internal management information reports.